Easiest way to explain Bitcoin

[Epicurus]

I've had people steal my credit card info (not the card itself) and proceed to run up $16,000 in charges. The credit card company just took care of that for me, at zero charge to me other than a bit of time. Until Bitcoin can offer that kind of protection, it will always be a niche currency at best. With Visa/Mastercard, I don't have to trust the site I'm on. I can spend money without thinking about it, because they've got my back. THAT is why they get their 2-3% from merchants, which the bitcoin community generally seems to fail to understand.

And who do you think had to pay for the $16,000?

Did you have to pay it?  No
Did the credit card company had to pay it? No
Did they get the money back from the criminal?  No

So where did they get your money back from?  They stole it back from the honest merchants who though they could trust you and your credit card.

They didn't "steal" it from anyone. The contract the retailer signs with the merchant bank that lets them accept credit cards spells out whose responsibility it is. If you don't like it because you want to put the burden on customers, well, that's your issue, but good luck building a viable business beyond the tiny scale.

Credit card companies and merchants agree up-front that it is the responsibility of the merchant to verify that the person using the card is the person who owns the card. Of course, merchants are going to get ripped off. We get kids using their parents' cards. We get fraudsters buying digital goods (so no delivery signature is required) with stolen card info. It happens. It's a cost of doing business absolutely no different than the similar cost that restaurants have for broken dishes or corner stores have for shoplifting.

In my case, the merchant was Home Depot and they paid for it because they obviously did not verify that the person holding the counterfeited card was me. Whether you think that's fair or not is pretty irrelevant. It's the effect of the legitimate, contractual agreements Home Depot, Visa, and myself variously have with each other.

[AliceWonder]

But certain types of business that are considered high risk already pay a higher rate, and they will be among the first to have an incentive to accept bitcoin and pass along the savings to the customer.

The pr0n industry - credit card companies are telling them they have to change their content even though it is legal under the Miller test (current test used for determining if something is obscene) - I expect over the next decade we will see more and more adult content providers ditching credit cards and going bitcoin because the credit card companies themselves are more restrictive than the government.

[dave111223]

I understand the customer side of the equation because that's the side that matters. I make money when customers feel safe in spending their money with me. Happily, Visa/Mastercard/Paypal assist both us and the customers by providing a trusted, regulated intermediary. We can certainly be ripped off by customers, and sometimes are, but that's our business to manage. If someone should bear the burden here, it should be the person whose enterprise is this, rather than the person who just needs to buy something. The merchant is more equipped to deal with the consequences of trust, in other words, in those cases where the third-party intermediary (visa/mastercard/paypal)'s guarantees aren't sufficient.

I'm not sure what is the point in this discussion when you openly state that only 1 side of the transaction "matters"...?

I make money because I sell a good product, at a good price and I have built up a good reputation over time.

I don't make money because people can throw their credit card at me willynilly without giving a crap if I'm going to rip them off.

As already stated, customer is in a much better equipped to trust a merchant because it is very easy to find feedback on a merchant.  Merchants are very poorly equipment to verify trust.

Visa/Mastercard do not "assist" you with chargebacks, it's handled by the individual banks involved.

For example:
I get paid to my Paypal, customer chargesback the payment on the Mastercard issued by Bank of America.

Paypal can then go to BoA (hat in hand) and say "pretty please can you pay us because the products really were shipped here's the proof".... it's solely the discretion of BoA if pay the money...and Paypal is not their customer, the merchant is not their customer so they have no incentive to pay, instead of the side with their own customer almost every time.

[AliceWonder]

I don't expect to see fiat currency vanish. I expect to see bitcoin used for a lot of on-line commerce but even on-line I expect fiat will still dominate. That's why I'm really not worried about the 21 Million BTC cap. I don't think it matters, fiat is still how most business will be done.

[Epicurus]

Bitcoin doesn't have to be useful in every situation for it to grow.  If bitcoin were used just for online gambling, or just for remittance payments, or certain other specific uses, that would be enough.  But since Bitcoin can serve all these plus more expect it to permeate other areas as well.    But if your Nascar fan never knows of nor cares about Bitcoin a few years from now, that's not failure.

Yeah, I agree with that. It's a big analog scale rather than some kind of failure/success binary. Still, I'm mainly interested, personally, because I want to be part of something that goes big or goes home.

But you as a consumer are paying for that.  The difference is that when a merchant includes the cost of the payment card fee into the price, every customer pays the higher price regardless of payment method used.  So currently, credit card customers are being subsidized by customers paying cash.    But certain types of business that are considered high risk already pay a higher rate, and they will be among the first to have an incentive to accept bitcoin and pass along the savings to the customer.

Oh sure, I understand. As we sell digital goods, we're a high risk customer. We let people mail us cash though, and they pay the same as credit card customers do. It's standard for most merchants to absorb transaction fees, making them invisible to consumers.

So when you pay for an airline ticket with credit card the fare is several percent higher than it should be.  So if your ticket is $400 with credit card or the equivalent of $388 with Bitcoin, and it is a non-refundable ticket anyway, what payment method are you going to choose?

Depends. If it's with a huge company, I may well choose the $388 option, knowing that they respect and want my loyalty. If it's with someone smaller, I'd rather pay $400 and know I'm reasonably insured against being ripped-off.

I mean, look, the major reason I'm interested here is because of the situation you describe. The 2-3% that credit cards take every year is an absolutely gigantic market world-wide and bitcoin has an opportunity cut into part of that. I hate the credit card companies and their collusion. I think they charge more than they would if they weren't effectively colluding. I'm just not as optimistic as some of you are.

So then those that still choose to pay with credit card do so because they plan to use the customer protection -- thus the cost of fraud on a per-dollar basis rises and the merchant fees have to rise.   It's a self-reinforcing trend.   A larger share of the remaining credit card transactions will be fraudulent, allowing the cash/bitcoin discount to become larger, which pushes more of the non-fraudulent activity over to the cash/bitcoin method.

Additionally, at the restaurant that has "Cash only", I don't get the option to say that I prefer credit card.  If that's the only payment method they accept then that's how I pay.   So when Nascar Bob wants tickets to a sold-out race and the seller only accepts Bitcoin payment, Bob will follow whatever instructions he needs to do to get his tickets.   Today, those instructions could be as simple as: "go to seven eleven, pay the cashier exactly N.NN dollars for a Moneygram bill payment transaction".  Boom.  Done.  Bob just made a purchase using Bitcoin and still doesn't have to know a thing about Bitcoin.

That already sounds too complicated for mainstream adoption on a regular basis, to me. If I have to go somewhere physical, that's a huge burden. The only reason I should have to go somewhere physical to buy something is if there is a physical thing there that I am physically picking up (groceries, etc).

[dave111223]

They didn't "steal" it from anyone. The contract the retailer signs with the merchant bank that lets them accept credit cards spells out whose responsibility it is. If you don't like it because you want to put the burden on customers, well, that's your issue, but good luck building a viable business beyond the tiny scale.

Yes I don't like it; enter Bitcoin.

Why should the merchant cover both cost of the transaction (the 3-5% transaction fee) + the cost of the customer getting their card stolen.

Credit card companies and merchants agree up-front that it is the responsibility of the merchant to verify that the person using the card is the person who owns the card. Of course, merchants are going to get ripped off. We get kids using their parents' cards. We get fraudsters buying digital goods (so no delivery signature is required) with stolen card info. It happens. It's a cost of doing business absolutely no different than the similar cost that restaurants have for broken dishes or corner stores have for shoplifting.

And how exactly (seeing as you are such as long time merchant) would you suggest that we "verify that the person using the card is the person who owns the card" with online purchased?

Currently merchants are forced to accept these shitty "contractual agreements" because they is no other option.  Now there is another option.